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  1. #1
    Join Date
    May 2003
    Location
    Michigan
    Posts
    29

    Question How can they do that?

    I have been doing some research, and I am about to start a hosting company via a reseller account. I visited some random hosting companies found through google and what not. I do not understand how they can offer such low prices. I am seeing like 12 GB of bandwith a month for like $7.95 or 5 GB for $3.95 or other crazy (seems crazy to me at least) priced stuff.

    The prices I plotted were much higher then that. Not that they were much higher dollar wise, just much less bandwith.

    Now my questions is this. Did I really screw up my research? Am I an idiot and should just forget about doing this? I just dont see how those prices are possible. How do they do that? Is it because they are on dedicated servers instead of reseller accounts or what? Thanks for any and all answers.

  2. #2
    Join Date
    May 2003
    Posts
    43
    A lot of hosts are indeed on dedicated servers, allowing them to sell at better prices. Others at those prices are just con artists advertising good prices so they can scam people...

    I think on a dedicated server it would actually be possible to sell 10 GB bandwidth for $5 and still make quite a hefty profit... don't worry about it if you're getting a reseller account, though.

    For an example of this, take a look here and you'll see what I mean...

  3. #3
    Join Date
    Mar 2003
    Location
    London Ontario, Canada
    Posts
    986
    Many many many threads have been addressed on this issue. It pops up in a bunch of different ways.

    i. People ask questions like you did
    ii. People discuss overselling
    iii. People talk about price vs value.

    Basically its called overselling. Overselling is when you put more people on a server than the server is able to handle assuming that not all your clients will use the resources avaiable to them.

    For a good post check out these threads:
    http://www.webhostingtalk.com/showth...hreadid=145017
    http://www.webhostingtalk.com/showth...hreadid=144868
    and
    http://www.webhostingtalk.com/showth...hreadid=133478
    www.idologic.com
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  4. #4
    Join Date
    Jan 2002
    Location
    Boston
    Posts
    5,014
    I think the main thing you need to realize is that almost everyone oversells.. The big difference in the companies is how much they offer.. Some may oversell by 5% and I have also seen people overselling by 900% which is most likely the ones you are seeing.

    The main thing you first need to realize is that you will never be able to survive attempting to be the cheapest because the is always someone offering more for less. The best thing for you to do is build a solid business plan, figure out what you can offer to make up your rates to where you will make a decent amount of profit and just provide the most reliable support and customer service you can.

    Also think of this. Would you rather have 500 clients paying $2/mo or 100 paying $10/mo?

  5. #5
    Join Date
    Mar 2003
    Location
    London Ontario, Canada
    Posts
    986
    OKIHosts was bang on. His advice sound. I disagree, however that nearly everyone over sells.

    There are many who don't even oversell 5% for reliablity reasons. There is simply no need to oversell.
    www.idologic.com
    www.demologic.com
    A company committed to people serious about their websites - If you don't DO LOGIC - what do you do?Check Us Out

  6. #6
    Join Date
    May 2003
    Posts
    43
    It's not necessarily overselling, is it? With a dedicated server which costs $98 a month for 80 GB space and 500 GB bandwidth, it's fully possible to make a very hefty profit selling 1 GB space and 6 GB bandwidth for just $5 a month...

    Or maybe I'm misunderstanding something here myself...?

  7. #7
    Join Date
    Mar 2003
    Location
    London Ontario, Canada
    Posts
    986
    I think you'd be hard pressed to find a server (with everything necessary to support most websites) for that cheap. (I'm not saying it doesn't exist).

    If your a small company Cpanel will cost you between $40 - $60 dollars / server alone. Add in the need to duplicate drives (for back up) and service / support most servers worth their while are going to cost you more than that.

    *shrugs*

    Cheers
    Jeff
    www.idologic.com
    www.demologic.com
    A company committed to people serious about their websites - If you don't DO LOGIC - what do you do?Check Us Out

  8. #8
    Join Date
    Jan 2002
    Location
    Boston
    Posts
    5,014
    Originally posted by OKIHost
    Some may oversell by 5% and I have also seen people overselling by 900% which is most likely the ones you are seeing.
    Please note I said "Some"

    At 1GB/6GB for $5 a month you can fit say 70 accounts after OS install, control panel install etc. So we have:

    70x5=350

    350-98 for server = 252 a month.. = about $8 a day pay

    How much is your time worth?

  9. #9
    Join Date
    Jul 2002
    Location
    Missouri
    Posts
    2,504
    Don't sell yourself short because other idiots do. Sell what you think it's worth. You don't need to compete with the bottom budget people to get business.
    What does one host say to the other? "(HostA) Want to go see a movie?" "(HostB) Sure, can your parents drive?"

    I'm premium, and no, I did not have to pay $6 a month to figure that out.

  10. #10
    Join Date
    May 2002
    Location
    Kansas City, USA
    Posts
    75
    OKIHost is right on doing the $$$ comparison. You can get a server with that amount of space, probably a celeron, that wil probably burn itself up if it's in a 1U unit. The problem is, when you only charge that much, you are probably someone that is working out of your basement by yourself. I don't have a problem with working out of your basement, but if you don't have a proper staff, you are going to go down in flames and get in way over your head. It all comes back to the old saying..."You get what you pay for". If you really dig back in the posts here at WHM, you can see what really happens to the hosting guys that undercharge and oversell. You can also see what happens to the companies that can't afford to hire qualified staff.
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